Another Thing About Parent (PLUS) Loans

cptofthehouse
Thu, 18 Oct 2012 09:24:44 +0000

Warning about these loans for all students, parents and anyone else that may see these in their financial aid packages.

These loans are NOT awards. They should NOT even be packaged with the awards, but a lot of schools do this. They are not guaranteed. They are simply a referral. Parents can APPLY for one and IF a parent passes the credit check, s/he can get the loan in any amount up to COA of the college selected minus other awards.

A major issue is that you may not know if the parent qualifys for that loan on May 1 which is the date that the student needs to make the commitment to a college. In fact, your application and promissory note has to be signed no earlier than a certain period of time (need to check that --maybe 90 days, I think) so that you can’t apply in April and be good for that loan for the fall semester. So you had better be sure you don’t have things on the credit record, such as foreclosures, bankruptcies, 90 late accounts, etc, or you won’t be approved.

I know of two familes whose kids could not go to school as planned as the parents thought they were getting these loans and when they went through the process, were denied.

If a parent is denied, an additional $4500 is made available to the student in Stafford loans. Also, if a parent can get a cosigner that passes muster, that is an option, and also an appeal is possible depending on what the problem is on the credit report. Also one parent might “pass” whereas the other may not.

I just want to make it clear, that this is not an automatic “get” like the $5500 Stafford loans a student can get with the FAFSA. The approval is pretty much routine, though a questionnaire, info session and promissory notes have to be signed to get the money. The PLUS does NOT work that way. You have to apply and be approved.

Colleges should not be showing this as part of the aid package for that reason but should include it as an option along with private ledners, credit unions, HELOCs, Pension Plan loans, and other such possibilities. That is all it is; a possibility.